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Tesla, SolarCity quietly selling building battery projects

Electric car company Tesla (s TSLA) and solar roof installer SolarCity have quietly been making deals that could one day lead to dozens of sales of battery projects coupled with rooftop solar systems built at both residential and commercial buildings in California. SolarCity confirmed the energy storage plans with me, and the duo have submitted at least 70 applications for projects to attempt to receive rebates from the California Public Utility Commission’s Self-Generation Incentive Program (SGIP), which provides incentives for distributed energy generation.

Such a system, which SolarCity and Tesla have been researching over the past two years, would couple Tesla’s lithium ion battery packs with SolarCity’s solar photovoltaic systems. Tesla sources small format (laptop-sized) batteries from Asian battery giants like Panasonic and bundles them together into a pack. The batteries connected to a solar rooftop would be able to store the solar energy for use when, say, a cloudy day reduces the power production of the solar panels. Both solar and wind will need to be coupled with energy storage technology to overcome the problem of intermittency.

Applicants for the SGIP program apply with individual utilities in California, and Tesla and SolarCity have applied for 70 applications under PG&E’s SGIP funds. The other California utilities SCE and SDG&E don’t clearly list out applicants for the program. SolarCity’s Director of Communications, Jonathan Bass, tells me that “each project has a separate application,” which shows that there’s a surprising amount of demand from commercial and residential customers within PG&E’s footprint for a battery system connected to a solar roof system. The SGIP program decided to include stand alone energy storage tech last year.

However, before these projects will move forward, SolarCity and Tesla are waiting on confirmation that they will get the rebates and they have not yet received these confirmations, says SolarCity’s Bass. The SGIP program briefly opened for applications in November 2011, and then more recently reopened for applications with limited funds available.

Tesla Roadsters lined up outside of the Model S Beta Customer event

CPUC Information Officer Andrew Kotch told me that the CPUC is “very pleased by the amount of storage activity in the program, as this emerging technology has a great amount of potential to contribute towards California’s climate and energy goals.” Kotch says the CPUC is “encouraged that the modifications the CPUC made to SGIP are resulting in more distributed storage applications. Specifically, the decision by the CPUC allows for storage systems to be coupled with existing PV systems, which is what the majority of the SolarCity/Tesla applications are.”

Kotch also said in an email to me that the SolarCity and Tesla projects have received “a conditional reservation from the utility program administrators,” which means that they’ll be paid the full incentive if/when they are completed according to the specifications given to the utility. “The projects will be funded as soon as they are complete and operational. They have a maximum of 18 months to reach completion, though it is likely many will be finished in less time,” said Kotch.

Economics of energy storage

This isn’t the first time it’s been reported that SolarCity and Tesla have been working on this tech. And actually the duo received $1.8 million from the CPUC two years ago to conduct research around how such an energy storage system would work. Back then the New York Times reported that there would be six homes that would get the battery systems for research purposes. SolarCity shows the energy storage box, with Tesla’s logo on it, on its website.

But this is the first time I’ve heard how far the project has gone in terms of commercialization. IDC Energy Insights analyst Sam Jaffe told me that if SolarCity and Tesla manage to bring these energy storage projects to fruition and gain widespread commercial interest, it could be a breakthrough in terms of using subsidies to get the economics for building energy storage low enough to be attractive to customers. The problem with using batteries for residential and commercial energy storage to date has been that it’s been way too expensive, said Jaffe.

If these systems are using both the SGIP subsidies and the federal investment tax credit (ITC) for clean power, then that would provide for more than half of the incentive for the energy storage system, said Jaffe. Lithium ion battery energy storage systems are generally one of the more expensive forms of energy storage.

There’s another connection between Tesla and SolarCity, too. Elon Musk is the Chairman of and an investor in SolarCity, and the co-founder and CEO of Tesla. SolarCity co-founder and CEO Lydon Rive, and SolarCity co-founder and COO Peter Rive are Musk’s cousins.

Seriously? I think you mean deep cycle, rather than deep cell. And limetime on Lithium chemistry batteries is far better than any Pb based in the vast majority of conditions (charge/discharge rate, low SOC etc). Best lose the Czar and just be Mr Energy

Here is the chance to go “off grid.” The one problem with my 7/2 kW SolarCity system is, that if the â€œgridâ€ goes down, so does my solar system. While this is a safety issue to prevent utility workers from being injured while working on the â€œgrid”, I would like to see the “lock out” device to be between the “grid” and my meter instated of between my solar system and meter. This movement of the â€œlock outâ€ device would allow the solar system to continue to power my home even if the â€œgridâ€ is down.
In researching this, I was told by Edison that the only way to do this was to go totally off grid. As an engineer, I see this as an attempt by the utility to overly complicate the use of alternative power sources. But itâ€™s their ball parkâ€¦â€¦. The cost of batteries was the deciding factor in not to complete the “off grid” alternative.
Hopfully these batteries will be cost effective.

The “lockout” you are refering to is specified in UL 1741. There are several manufacturers that have grid interactive inverters that have battery capabilities and are UL 1741 compliant. Outback and SMA are two manufacturers with such inverters. Often times when dealing with a utility you need to request what the specific points of concern are, then let the manufacturer respond to the concerns of the utility. This will allow the concerns of the utility to be voiced and addressed by the manufacturer who is very knowledgeable (and will speak the same language as the utility engineer).

Are these new packs? It seems like Tesla would be finding a way to reuse older packs that are starting to come out of the first Roadsters. If you’re buying a 10kWh pack, it shouldn’t really matter if that’s a 2 foot cube of new cells or a 3 foot cube of old cells.

It’s a great idea. We’re seeing how the PV panel market is actually healthier on rooftops versus at utility scale. Makes sense that battery storage would be healthier in home market versus electric vehicles also. The theme I see coming out is that cleantech sold to end users one-by-one may be a more viable way to start than the big sell a huge power utility approaches that we’ve seen so far.

I purchased a SolarCity PV system and was offered the chance to lease a 10 kWh battery system for $10/mo for 10 years. That sounded like a good deal, so I’ve signed a contract to that effect. 10 kWh is enough to power essential systems at our home for at least a day and a half even if the PV system isn’t charging the batteries at all. In spring/summer/fall 10 kWh plus our 2.5 kW DC PV system should be able to keep essential electrical devices running for months.

($10/mo * 12mo/yr * 10 yrs) / 10kWh = $120/kWh, which is way below the cost of new cells today (which have yet to reach below $200/kWh; a recent report estimated $689/kWh, although I think that is way off), much less the price at the pack level.

Given batteries of this type usually have less than 10 year life span anyways, when cycled at 1C (5-7 years before it reaches 70% capacity, although in your case it is 2.5kW/10kWh = 0.25C, so it’ll probably last longer), that’s a pretty good deal!

But see this underlines the basic weirdness of having battery storage in a grid-attached environment. The batteries aren’t producing any energy; the solar installation is. You can already sell the excess to the grid, so what’s the battery for? Since you’re grid attached, you can just buy power back from the grid when the cells aren’t producing.

Not sure I see the benefit to the person buying this in a grid-attached situation. Off-grid of course it makes all kinds of sense.

Because the big limitation of distributed renewables is their intermittent output, whilst their output can vary unpredictably through the day there ability to seriously penetrate grid supply is significantly limited. The one technology that can allow us to break free from a ~20% cap on intermittent renewable penetration is energy storage. This perception of the unreliable nature of renewable power is a major public relations issue for renewables which is commonly exploited to oppose support for renewable deployment. So this doesn’t do much for individuals at this stage except providing backup during power failures, but we need to develop it so that into the future renewables can grow beyond 20-30% without causing grid instability, and in the meantime to rebut criticism of renewables on the basis of unreliability.

@Ryan Stanton-Wyman, the max incentive is $2,000 per kW, not per kWh. So a 4-hour battery would have a max incentive of $500/kWh. Additionally, the customer must pay a minimum of 40% of system cost; the 60% max incentive applies to SGIP as well as any federal incentives (including tax). These are clearly laid out in Section 6 of the SGIP Handbook. The SGIP is not designed for mass deployment. Rather, it reduces cost of early systems so the technologies can reach volumes and cost that yield support-free economic payback. This is no different than what has been done in the past for fossil-fuel and nuclear technologies.

The typical installed costs of Lithium Ion storage systems is around $1,000 / kWh or less. So with the SGIP incentive of $2,000 / kWh, Tesla and Solar City are likely making a handsome profit from this ratepayer-funded program. And at the rate they’re applying, there may not be much funding left for anyone else. The SGIP for storage is great for a select few customers, but it falls far short of achieving any kind of mass deployment.

@Grant Gerke, Not sure, the CPUC only said they thought it would be within 18 months. Sounds like they will be approved, as the CPUC says they were given â€œa conditional reservation from the utility program administrators.”